Global HR Glossary

What is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) helps businesses outsource their HR functions — from payroll and benefits administration to other day-to-day HR tasks. It essentially acts as a co-employer, taking on many of the responsibilities tied to managing a workforce.

What Does a Professional Employer Organization Handle?

A PEO is more than just an outsourced HR provider, it’s a strategic partner for managing your workforce. Core responsibilities typically include:

• Payroll administration: Handling employee pay, tax withholdings, and filings accurately and on time.
• Benefits management: Offering access to competitive benefits packages (like health insurance and retirement plans) usually reserved for larger companies.
• HR compliance: Staying up to date with ever-changing labor laws so you don’t have to.
• Risk mitigation: Helping you navigate complex employment regulations and avoid legal missteps.

With a PEO, you can offload the busywork of human resources tasks to HR experts.

How Does the PEO Process Work?

Getting started with a PEO is simple and typically takes under two weeks. Here’s how it usually works:

• Initial consultation: You and the PEO align on your business needs, headcount, and services.
• Onboarding: The PEO establishes a co-employment relationship and starts setting up payroll, benefits, and compliance systems.
• Transition: Employees are onboarded under the PEO structure, while you maintain day-to-day management.
• Ongoing support: Your PEO handles backend HR operations while advising you on best practices.

This partnership structure allows you to retain control over your team while the PEO manages the administrative side.

Why Do Companies Work with PEOs?

Managing HR in-house takes time and specialized knowledge, especially when teams are spread across multiple states or countries. Companies turn to PEOs to:

• Save time: Let experts handle payroll, benefits, and compliance tasks.
• Reduce costs: Gain access to better benefits and avoid costly compliance mistakes.
• Improve employee experience: Offer robust HR support, quicker issue resolution, and better benefits.
• Scale efficiently: Focus on business growth while your HR operations scale smoothly behind the scenes.

A PEO can serve as an extension of your HR department, which is particularly beneficial for small- to mid-size companies.

What Should You Look for in a PEO?

Not all PEOs are the same. Look for a provider with:

• Experience in your industry: They’ll understand your challenges and compliance risks.
• Transparent pricing: Clear, straightforward billing, with no hidden fees.
• Scalable solutions: Support that grows with your team.
• Strong benefits offerings: Access to high-quality insurance, retirement plans, and more.

PEO or EOR — What’s the Difference?

While a PEO partners with you in a co-employment model, an Employer of Record (EOR) takes on full legal responsibility as the official employer for international employees, directly handling payroll, compliance, and contracts.

• Use a PEO when you're hiring in regions where your business is already registered.
• Use an EOR when expanding to new countries without setting up a local entity.

Some companies even use both, depending on their global hiring needs.

By partnering with a PEO, you can streamline HR, reduce administrative overhead, and give your team the support they need to thrive, all while staying compliant and competitive.